Category

ESG

Jul 06
0

Daily Brief ESG: Will Management that Incorporates Cost of Capital Be Fully Implemented 7 Years from Now and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Management that Incorporates Cost of Capital Be Fully Implemented 7 Years from Now, in 2028?

Will Management that Incorporates Cost of Capital Be Fully Implemented 7 Years from Now, in 2028?

By Aki Matsumoto

  • Considering that it took seven years to finally begin reducing policy-held shares, it seems reasonable to assume that many companies will begin seriously incorporating capital costs into management in 2028.
  • TSE states that while Prime Market has most companies whose initiatives are out of step with investors’ perspectives, companies whose initiatives are highly regarded by investors show superior stock performance.
  • TSE appears to be placing its hopes on efficient market hypothesis. However, investors need to see increase in capital profitability that will convince them of the path to value creation.

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Jul 02
0

Daily Brief ESG: Now Is Time to Increase the Number of Female Directors so that They Can Contribute to Value Creation and more

By | Daily Briefs, ESG

In today’s briefing:

  • Now Is Time to Increase the Number of Female Directors so that They Can Contribute to Value Creation

Now Is Time to Increase the Number of Female Directors so that They Can Contribute to Value Creation

By Aki Matsumoto

  • Since % of women among internal directors is low, many companies try to increase external directors, which leads to an issue of directors serving on the boards of multiple companies.
  • Investors expect gender diversity to have long-term impact on business performance. However, due to the low percentage of female board members, no clear correlation with value creation has been demonstrated.
  • In evaluations of board effectiveness, it’s clear that few companies share issues within boards and engage in sufficient discussion. There appears to be a lack of sufficient discussion on issues.

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Jun 30
0

Daily Brief ESG: Disclosure of Individual Board Directors’ Remuneration Has Not Progressed and more

By | Daily Briefs, ESG

In today’s briefing:

  • Disclosure of Individual Board Directors’ Remuneration Has Not Progressed

Disclosure of Individual Board Directors’ Remuneration Has Not Progressed

By Aki Matsumoto

  • It’s unclear whether voluntary compensation committee can make proactive recommendations, or whether it simply follows the proposals of CEO/BOD, and how much the decisions of the voluntary committee are influential.
  • Only 0.1% of listed companies are disclosing the individual compensation of all board directors, as investors have long requested, and there has been no progress in disclosing individual compensation.
  • Performance-Based compensation is implemented by 72.7% of companies listed on the Prime Market. Recently, there has been an increase in the introduction of restricted stock in place of stock options.

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Jun 28
0

Daily Brief ESG: Companies Formalized Independence of Voluntary Nomination Committees and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies Formalized Independence of Voluntary Nomination Committees, but No Signs of Improvements

Companies Formalized Independence of Voluntary Nomination Committees, but No Signs of Improvements

By Aki Matsumoto

  • Most companies with voluntary nomination committees have majority of committee members as outside directors, and two-thirds have outside directors as chairpersons, but it’s difficult to establish a statutory nomination committee.
  • It’s unclear whether voluntary nomination committee can make proactive proposals or whether it simply follows proposals made by CEO, and to how much influence the decisions of voluntary committee have.
  • More than half of listed companies have former presidents and other executives serving as advisors or consultants. Concerns remain that former board directors may still be involved in management.

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Jun 27
0

Daily Brief ESG: Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan  – Negative Governance and more

By | Daily Briefs, ESG

In today’s briefing:

  • Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan  – Negative Governance

Lotte Corp Sells 145 Billion Won Worth of Treasury Shares to Lotte Moolsan  – Negative Governance

By Douglas Kim

  • After the market close on 26 June, LOTTE Corporation (004990 KS) announced that it sold 5% of its outstanding shares worth 145 billion won to its affiliate Lotte Moolsan. 
  • This is poor corporate governance since the company should be cancelling the treasury shares instead.
  • Major reason why Lotte Corp sold its 5% stake in the company to Lotte Moolsan is to have the Lotte Group Chairman’s Shin family maintain control over the Lotte Group. 

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Jun 26
0

Daily Brief ESG: The Stage of Maintaining Appearance by Ensuring Attendance of Independent Directors Has Ended and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Stage of Maintaining Appearance by Ensuring Attendance of Independent Directors Has Ended

The Stage of Maintaining Appearance by Ensuring Attendance of Independent Directors Has Ended

By Aki Matsumoto

  • Although the ratio of independent directors has increased over the past 10 years, the reality is that many people believe that corporate governance has not improved in substance.
  • In order to ensure diversity on the board of directors (as a measure for director appointment proposals), there is a growing trend for companies to hire a third independent director.
  • The role of independent directors is becoming increasingly important. In this context, focus is also being placed on independent directors who hold concurrent positions as executives at other companies.

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Jun 24
0

Daily Brief ESG: Both Statutory Nomination Committee and BODs Chaired by Outside Directors Are in the 2% Range and more

By | Daily Briefs, ESG

In today’s briefing:

  • Both Statutory Nomination Committee and BODs Chaired by Outside Directors Are in the 2% Range

Both Statutory Nomination Committee and BODs Chaired by Outside Directors Are in the 2% Range

By Aki Matsumoto

  • Since the number of companies transitioning to US Type 3 Committees isn’t increasing, a perverse debate has begun on weakening the authority of nomination committees in US Type 3 Committees.
  • Despite calls from investors to appoint outside directors as chairpersons of BODs to stimulate discussion and strengthen supervisory functions by separating supervision from execution, these calls have been ignored.
  • If the board of directors simply approves plans created by each business division based on their budgets, then it is not involved in important company decisions.

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Jun 22
0

Daily Brief ESG: Governance Issues Have Not Been Resolved as Far as Profiles of TSE-Listed Companies Shows and more

By | Daily Briefs, ESG

In today’s briefing:

  • Governance Issues Have Not Been Resolved as Far as Profiles of TSE-Listed Companies Shows

Governance Issues Have Not Been Resolved as Far as Profiles of TSE-Listed Companies Shows

By Aki Matsumoto

  • The fact that 59.2% of companies have March fiscal year-end and concentrate AGMs in the last week of June, preventing shareholders from attending AGMs, is a fundamental corporate governance issue.
  • Companies with foreign shareholdings of over 30% represent 17.4% of prime market. Most companies continue to run without a sense of urgency and without much influence from overseas investors.
  • While the number of listed subsidiaries has decreased over the past decade, the number of equity method affiliates has increased significantly. The business portfolio has not yet been fundamentally restructured.

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Jun 21
0

Daily Brief ESG: A Dialogue with a Skilled Outside Director Will Create Value. This Premise Is Important and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Dialogue with a Skilled Outside Director Will Create Value. This Premise Is Important

A Dialogue with a Skilled Outside Director Will Create Value. This Premise Is Important

By Aki Matsumoto

  • The reason why many companies have previously rejected requests by overseas investors to meet with outside directors is that they’ve prioritized information control over constructive dialogue with shareholders and investors.
  • The fact that companies begun to provide opportunities for communication with outside directors will hopefully lead to shifts in value-creating management, but it’ll not easy to spread to many companies.
  • Even if more companies provide opportunities for communication between outside directors and investors in the future, dialogue with unskilled outside directors will not be fruitful.

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Jun 18
0

Daily Brief ESG: Thanks to TSE’s Guidance and more

By | Daily Briefs, ESG

In today’s briefing:

  • Thanks to TSE’s Guidance, Parent-Subsidiary Listings Remain a Long-Lasting Investment Opportunity

Thanks to TSE’s Guidance, Parent-Subsidiary Listings Remain a Long-Lasting Investment Opportunity

By Aki Matsumoto

  • From the standpoint of endorsing parent-subsidiary listings, TSE intends to provide better disclosure guidance to ensure that the interests of minority shareholders of listed subsidiaries are adequately secured.
  • While investors expect early resolution, parent-subsidiary listings continue to be a long-lived theme and investment opportunity, thanks to the TSE giving them time to dissolve their parent-subsidiary listings.
  • As for the parent-subsidiary listings, the key is the percentage of foreign holdings, with some companies initiating restructuring of their business portfolios and many others not.

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